FBN Holdings Plc, the parent company of First Bank Nigeria, saw a sharp rise in its stock price last week, increasing by more than 10% on the Nigerian Exchange (NGX). Investors responded positively to the company’s strong financial performance, with its share price reaching N33 per unit.
The financial services giant saw its market capitalization climb to N1.18 trillion, gaining N109.5 billion within the week. Over the past three years, FBN Holdings’ earnings per share have increased by an average of 57% annually. However, the company’s share price has only grown by 39% per year, indicating that its stock may have been undervalued relative to its earnings growth.
FBN Holdings’ latest financial report revealed a remarkable 137.4% increase in earnings per share, rising from N8.59 to N20.40. The company’s total interest income soared by 158.4% year-on-year, reaching N2.42 trillion, surpassing the N2 trillion mark for the first time.
This growth in interest income was largely driven by higher yields in the fixed-income market and a 69.4% expansion in earning assets, which now stand at N18.99 trillion. Key income drivers included an increase in loans to customers, investment securities, and advances to other banks.
Loans and advances to customers jumped by 123.7% to N1.36 trillion, investment securities surged by 205% to N849.66 billion, and advances to banks skyrocketed by 327.1% to N206.42 billion. However, this growth came at a cost, as interest expenses also rose significantly, increasing by 163.5% to N1.03 trillion due to higher costs on customer deposits and interbank borrowings.
The current high-interest-rate environment has had a broad impact on FBN Holdings’ financials. Interest paid on customer deposits surged by 132.2% to N591.86 billion, while interest on deposits from other financial institutions spiked by 427.4%, reaching N275.84 billion.
The proportion of current and savings accounts in the company’s funding mix improved slightly to 81.6%, up from 81.2% the previous year. However, borrowing costs also increased by 86.3%, reaching N160.98 billion, while credit impairment charges (bad debt provisions) rose to N410.81 billion.
Non-interest income also saw notable growth, increasing by 43.2% year-on-year to N847.28 billion. This was mainly driven by a rise in net fees and commissions, which grew by 27.9% to N239.18 billion, and foreign exchange revaluation gains, which jumped by about 110% to N33.83 billion. These gains helped offset foreign exchange trading losses of N96.43 billion and investment securities losses of N40.29 billion.
Despite the strong revenue growth, operating expenses also rose significantly, climbing by 73.4% to N965.82 billion. The increase was attributed to higher personnel costs, levies paid to the Asset Management Corporation of Nigeria (AMCON), depreciation and amortization expenses, and the Nigeria Deposit Insurance Corporation (NDIC) premium.
Nevertheless, FBN Holdings’ operating income grew faster than its expenses, leading to an improvement in its cost-to-income ratio, which dropped to 52.8% from 61.0%. This efficiency gain contributed to the company’s improved profitability, with profit after tax surging by 137.3% year-on-year to N736.73 billion, after accounting for tax expenses of N125.66 billion.
Overall, investors remain optimistic about FBN Holdings’ financial health and future growth potential, which has fueled renewed demand for its stock on the NGX.
